United Parks & Resorts Inc. (NYSE:PRKS) Q1 2024 Earnings Call Transcript May 8, 2024
United Parks & Resorts Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and welcome to the United Parks & Resorts First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matthew Stroud, Investor Relations. Please go ahead.
Matthew Stroud: Thank you, and good morning, everyone. Welcome to United Parks & Resorts first quarter earnings conference call. Today’s call is being webcast and recorded. A press release was issued this morning and is available on our Investor Relations website at wwwunitedparksinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Joining me this morning are Marc Swanson, Chief Executive Officer; and Jim Forrester Interim Chief Financial Officer and Treasurer. This morning we will review our first quarter financial results and then we will open the call to your questions. Before we begin I would like to remind everyone that our comments today will contain forward-looking statements within the meaning of Federal Securities Laws.
These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements including those identified in the Risk Factors section of our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time and will be included in our filings with the SEC that are available on our website. We undertake no obligation to update any forward-looking statements. In addition on the call we may reference non-GAAP financial measures and other financial metrics such as adjusted EBITDA and free cash flow. More information regarding our forward-looking statements and reconciliations of non-GAAP measures to the most comparable GAAP measure is included in our earnings release available on our website and can also be found in our filings with the SEC.
Now I would like to turn the call over to our Chief Executive Officer, Marc Swanson. Marc?
Aerial view of a luxurious resort near Canton, Ohio.
Marc Swanson: Thank you, Matthew. Good morning everyone and thank you for joining us. We are pleased to report record financial results this quarter including record revenue and adjusted EBITDA. While attendance in the quarter benefited from a positive calendar shift including the shift of the Easter holiday into the last day of the first quarter from the second quarter and prior year. This benefit was almost entirely offset by unusually wet and cold weather during the quarter particularly on certain peak attendance days and mainly in our Florida parks. In-park per capita revenue excluding the impact of certain onetime revenue increased 4% during the quarter representing the 16th consecutive quarter of growth. Looking ahead, we are excited about our plans for 2024 with an exceptional lineup of new one-of-a-kind rides, attractions and events, improved in-park venues and offerings across our parks some of which are already live and others that are anticipated to debut later this spring and summer.
We are excited to have launched SeaWorld Park’s 60th anniversary celebration featuring special events, shows and attractions that will continue throughout the year. We hope many will come celebrate with us at SeaWorld’s 60-year history of conservation, education and fun for all agents. We’re also encouraged by the booking trends at our Discovery Cove property, along with our group bookings, which are running well ahead of 2023. In addition, in the first quarter of 2024, international visitation, while still down compared to 2019, improved meaningfully compared to 2023. We strongly believe we have a clear opportunity to drive meaningfully more attendance and total per capita spending, and we have high confidence in our ability to continue to deliver operational and financial improvements that will lead to meaningful increases in shareholder value.
We continue to expect to deliver new records in revenue and adjusted EBITDA for 2024. I want to thank our stockholders and Board of Directors for their recent overwhelming approval of our $500 million share repurchase program, which we have already begun to implement and through which we are continuing our track record of returning meaningful capital to shareholders. Finally, I want to thank our ambassadors for their dedication and commitment as we prepare for what we believe will be an exciting and busy summer season. For 2024, we have an exciting lineup of new rides, attractions, events and new and improved in-park venues and offerings with something new and meaningful in our parks. Let me highlight a few of our new rides and attractions, along with a couple of events.
In March, SeaWorld San Antonio opened Catapult Falls, the world’s first launched flume coaster featuring the world’s steepest flume drop and the tallest flume drop in Texas. Also, Aquatica Orlando opened Tassie’s Underwater Twist, featuring — Tassie’s Underwater Twist, Florida’s most immersive water slide that takes riders on an accelerating journey into a world of watery wonders set to an inspiring original musical score. The remaining new attractions include the following: in Williamsburg, Busch Gardens will open Loch Ness Monster: The Legend Lives On, an all new experience loaded with all new thrills, dramatic storytelling and innovative effects as it takes riders on Nessie’s newly updated signature track. In Orlando, SeaWorld Orlando will open Penguin Track, an unforgettable multi-launch family coaster adventure where guests will navigate the harsh and arctic environment in search of a colony of Penguins.
This attraction includes a new realm featuring a restaurant, signature bar and expensive giftshop along with one of the largest collections of Penguins in North America. Penguin Trek will be an indoor outdoor coaster experience, the park’s first family coaster as well as the eighth and most immersive addition to the coaster capital of Orlando. In San Diego, SeaWorld San Diego will open Jewels of the Sea, the Jellyfish experience, a first of its kind attraction featuring a compelling mix of immersive media and live jellyfish. This interactive view into the mysterious underwater world of glowing and graceful jellyfish will be something to see. In Tampa Bay, Busch Garden Tampa Bay will open Phoenix Rising, a family-friendly roller coaster that takes riders soaring above the Serengeti Plain then dropped into an array of fun-filled twist and turns at speeds up to 44 miles per hour.
This will be the tallest and fastest inverted family coaster in North America. Other attractions and events set to open include [indiscernible] Aquatica San Antonio, Aquazoid at Aquatica Orlando, 123 playground and Sunny Day Carousel at Sesame Place Philadelphia, Nitro Racer at Water Country USA, Castaway falls at Adventure Island and Dine with Elmo & Friends at Sesame Place, San Diego. Now let me give a brief update on some of our strategic initiatives. First, we continue to progress with our cost and efficiency related work. And as we noted last quarter, we expect $50 million of realized savings in 2024. As you all know, cost management and discipline is a key focus of our management team, and we have demonstrated our ability to deliver on cost efficiencies over the last few years.
Second, on the digital transformation front, we continue to build out our CRM capabilities, which are still in their infancy and roll out and improve our mobile app. In regards to our mobile app, we are pleased that it is being used by an increasing number of guests in our parks to improve their park experience. The app has now been downloaded more than 9.4 million times up from 8.5 million at the end of Q4. Total revenue generated on the app is up approximately 10% compared to prior year, and we are now seeing approximately — an approximately 28% increase in average transaction value for food and beverage purchases made through the app compared to point-of-sale orders. Mobile ordering is operating at approximately 88% of our target restaurants.
We are excited about the potential of the app and its ability to improve the in-park guest experience, drive increases in revenue and decreases in cost. We are continuing to refine current capabilities and develop additional capabilities to further increase engagement and optimize the experience. Third, on the international front, we are excited that SeaWorld Abu Dhabi Abu Dhabi is celebrating its one-year anniversary this month, and their performance is ahead of expectations. We continue to make progress with discussions related to other international opportunities and expect to have more to share in coming quarters. Fourth, on the hotel front, we are very excited about our hotel opportunity across our port portfolio. We continue to have conversations with various partners and will share more in the coming quarters.
As we discussed last quarter, we are laser-focused on the ROI for these hotel opportunities. I’m very excited about the significant investments we are making and the many initiatives we have underway across our business that we expect will improve the guest experience, allow us to generate more revenue and make us a more efficient and more profitable enterprise. We are building an even stronger and more resilient business that we are confident and expect will deliver improved operational and financial results and meaningful increases in shareholder value. Let me briefly comment on our balance sheet, which continues to be strong. Our March 31, 2024, net total leverage ratio is 2.57 times and we had approximately $577 million of total available liquidity, including approximately $204 million of cash on the balance sheet in advance of us starting our summer season where we typically generate the majority of our cash flow.
This strong balance sheet gives us flexibility to continue to invest in and grow our business and to opportunistically allocate capital with the goal to maximize long-term value for shareholders. In January, we repriced our term loan and reduced our interest rate by 50 basis points or approximately $5 million per year. Earlier this month, we paid off our high-cost senior secured notes raised in 2020 with an add-on to our term loan, which we expect will save at least $2 million of interest per year, and we raised an incremental $152.5 million that we put on our balance sheet. I want to again thank our stockholders and Board of Directors for their recent overwhelming approval of our $500 million share repurchase program, which we have already begun to implement and through which we are returning capital to shareholders.
During the first quarter, we repurchased 375,000 shares for an aggregate total of approximately $20.2 million. Subsequent to March 31, 2024 through May 6, 2024, we purchased approximately 1.5 million shares for an aggregate total of approximately $80.6 million. Needless to say, the Board and company believe our shares are materially undervalued. We have significant confidence in our business and our prospects. And as we shared with you last quarter, any reasonable way you look at it, we feel we are materially undervalued and that there is significant upside opportunity in our current share price. Our financial position is strong. Our business is resilient in our first quarter results, along with the coming opening of more of our ride attraction and event lineup, but all the initiatives that we have underway give us confidence in our ability to continue to achieve new records in revenue and adjusted EBITDA for 2024.
With that, Jim will discuss our financial results in more detail. Jim?
James Forrester: Thank you, Mark. Our team is looking forward to sharing our quarter’s strong performance with our audience this morning. During the first quarter, we generated record total revenue of $297.4 million, an increase of $4.1 million or 1.4% when compared to the first quarter of 2023. The increase in total revenue was primarily a result of an increase in attendance, partially offset by decreases in admissions per capita and in-park per capita spending. Attendance for the first quarter of 2024 increased by approximately 72,000 guests or 2.1% when compared to the prior year quarter. Attendance was positively impacted by a favorable calendar shift, including the earlier timing of Easter and certain school spring breaks and was negatively impacted by adverse weather, particularly at our Florida parks including during peak visitation periods.
Excluding the impact of certain onetime revenue associated with the opening of SeaWorld Abu Dhabi in 2023, total revenue per capita increased 1.2% and in-park per capita spending increased 4%, including the impact of certain onetime revenue associated with the opening of SeaWorld Abu Dhabi in 2023, total revenue per capita decreased 0.7% to $86.21 and in-park per capita spending decreased 0.5% to $38.15 from the first quarter of 2023. Admission per capita decreased 0.9% to $48.06. Admission per capita decreased primarily due to the net impact of the admissions product mix when compared to the prior year quarter. In-park per capita spending decreased, primarily due to a decrease in onetime revenue related to our international services agreements partially offset by the impact of pricing initiatives when compared to the first quarter of 2023.
Operating expenses decreased $7.8 million or 4.5% when compared to the first quarter of 2023. The decrease in operating expenses was primarily due to a decrease in costs associated with our international services agreements, and a decrease in legal costs including approximately $3.1 million related to the previously disclosed temporary COVID-19 park closures when compared to the first quarter of 2023. Selling, general and administrative expenses decreased $0.4 million or 0.8% compared to the first quarter of 2023. We generated a net loss of $11.2 million for the first quarter compared to a net loss of $16.5 million in the first quarter of 2023. The increase in net income was primarily a result of the impact of lower operating expenses. We generated adjusted EBITDA of $79.2 million, an increase of $6.7 million when compared to the first quarter of 2023.
Adjusted EBITDA was positively impacted by the decrease in expenses and an increase in total revenue Now turning to our balance sheet, our March 31, 2024 net total leverage ratio was 2.57 times and we had approximately $577 million of total available liquidity including $204 million of cash on the balance sheet. The strong balance sheet gives us flexibility to continue to invest in and grow our business and to opportunistically allocate capital with a goal to maximize long-term value for our shareholders. As previously mentioned in January, we repriced our term loan and reduced our interest expense. And earlier this month we paid off our high-cost senior secured notes raised in 2020 with an add-on to our term loan which will reduce the company’s annual interest expense going forward.
As part of the add-on we raised an incremental $152.5 million that we put on our balance sheet. As Marc already mentioned, during the quarter our stockholders and Board of Directors approved a new $500 million share buyback authorization in anticipation of us exhausting our previously authorized $250 million authorization from August 2022. During the first quarter we repurchased 375,000 shares for an aggregate total of approximately $20.2 million. Subsequent to March 31 2024 and through May 6 2024, we purchased approximately 1.5 million shares for an aggregate total of approximately $80.6 million. As Marc said, we believe our shares are materially undervalued. Our deferred revenue balance as of the end of April was $217.7 million. Excluding certain one-time items deferred revenue increased approximately 1.4% when compared to April of 2023.
As a reminder, our deferred revenue balance contains a number of products to include ticketing vacation packages and in season passes and ancillary products. We also continue to see many pass holders, who have been with us for at least a year who transitioned to month-to-month payments at the completion of their initial past commitment. This month-to-month revenue does not show up as deferred revenue. Through April 2024 our pass base including all pass products was down 3% compared to April 2023, but up 32% when compared to April 2019. We are pleased that we are seeing mid-single to low double-digit price increases depending on our pass product compared to prior year. We believe we have our best pass benefits program ever, which we expect will drive additional increases in pass sales and a strong pass base for this year, especially, now that we are in the peak advertising and selling season.
We spent $87.3 million on CapEx in the first quarter of 2024 of which approximately $56.3 million was on core CapEx and approximately $31 million was on expansion and/or ROI projects. For 2024, we expect to spend approximately $175 million on core CapEx and approximately $50 million of CapEx on growth and ROI projects. Now let me turn the call back over to Marc who will share some final thoughts. Marc?
Marc Swanson: Yes. Thanks, Jim. Look before we open the call to your questions I have some closing comments. In the first quarter of 2024, we came to the aid of 173 animals in need. Over our history we have helped over 41,000 animals including autonomous dolphins, manatees, sea lions, seals, sea turtles, sharks, birds and more. I’m really proud of the team’s hard work and their continued dedication to these important rescue efforts. We are certainly excited about 2024 and I want to thank our ambassadors for their dedication and commitment as we prepare for what we believe will be an exciting and busy summer season. We continue to believe there are significant additional opportunities to improve our execution take advantage of clear growth opportunities and continue to drive meaningful long-term growth in both revenue and adjusted EBITDA.
We continue to have high confidence in our long-term strategy and our ability to deliver significantly improved operating and financial results that we expect will lead to meaningfully increased value for stakeholders. So now we can open it up for your questions.
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